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Bernstein Burnout: Why Is The Firm Grossly Underpaying Their Advisors?

There has been an ever-growing stream of Bernstein advisors that have left the firm over the past year. And that stream has seemed to pick up speed as 2019 turned into 2020. Generally, a movement that finds advisors exiting a firm like Bernstein finds its way to one, maybe two competitors at best; but that hasn’t been the case here. Bernstein advisors have exited to RBC, First Republic, Wells Fargo, Stifel, Morgan Stanley, and others.

So why has the exodus from Bernstein accelerated and seems to be doing so again?

Beyond the different ways that competing firms have become comfortable with taking on the Bernstein advisor and their model, and paying them huge bonuses to do so, it comes down to payout. Yes, simple comp grid mathematics is moving the needle in a huge way.

To elaborate it out a bit further, the largest advisors and teams at Bernstein are topping out at 22-23% on the firm’s grid. A team generating $5M in annual production is getting a net somewhere around $1.1M – $1.25M in W-2 compensation. Fully half of what a Morgan Stanley, UBS, or Wells Fargo team would receive – to say nothing of even more generous payout options at places like RBC (albeit just a few basis points higher than the wires).

That kind of blatant disregard for what should be considered ‘fair market value’ in terms of the traditional services and the role that AB advisors play with their clients – simply stated, isn’t fair. Bernstein advisors are wising up to the truth that they are grossly underpaid versus their peers. All the while managing UHNW relationships for elite clientele; generally serving 70-90 wealthy families per team.

Now take that same business to competitors like RBC or Wells Fargo and the team makes $2.5 M – $2.6M annually, operating in an ‘open architecture’ environment, and only has to move 80 households while they are at it.

The disparity in payout is a massive blind spot for Bernstein and will continue to, deservedly so, agitate advisors into the welcoming arms of competitors. One wonders when Bernstein, based on departures, may be forced to make meaningful changes to their grid?